How Come No Desks At Investment Banks?

How come no one here seems to want to work at the trading desk of an investment bank. If I remember correctly a lot of the people in market wizards were working at trading desks in investment banks. Do these not exist anymore? Are the jobs very hard to get? Is there some other reason? Or am I just confused? All Comments Appreciated.

I think that there are people here who work at ib's, but they are mostly lurkers and don't want to disclose their names or firms. Finally, I'd say that 95% of people here are small time daytraders (accounts under 500k). That's just the people attracted to the site, and most are novices as well. If you ask around, you may eventually find a few.

How come no one here seems to want to work at the trading desk of an investment bank. If I remember correctly a lot of the people in market wizards were working at trading desks in investment banks. Do these not exist anymore? Are the jobs very hard to get? Is there some other reason? Or am I just confused? All Comments Appreciated.

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Investment banks you are working for somebody else. Quite a few traders got into the industry to not have anyone tell them what to do other than the market. There have been multiple layoffs in the last year from investoment banks.

How come no one here seems to want to work at the trading desk of an investment bank. If I remember correctly a lot of the people in market wizards were working at trading desks in investment banks. Do these not exist anymore? Are the jobs very hard to get? Is there some other reason? Or am I just confused? All Comments Appreciated.

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YoungNAmbitious:

I don't know if I can answer your question directly, "How come no one here seems to want to work at the trading desk of an investment bank. " That is a poll for you to figure out.

But, I'll try to answer ther other questions.

You wrote,"If I remember correctly a lot of the people in market wizards were working at trading desks in investment banks. Do these not exist anymore? Are the jobs very hard to get? Is there some other reason? Or am I just confused? All Comments Appreciated. "

Yes, a lot of the market wizards did work at i-banks trading desks in the past like Lipschutz, etc. Trading jobs are still there, but given the current market coniditon they are getting scarcer.

And those jobs are usually very difficult to get in. They only interview at the top 10 schools if you are a new graduate. And even then they want top grades, activities, etc. But once you get in, it's not a bad deal. I worked at Merrill for a while then went on the buyside of the biz.

And I've also done prop trading. and I can say this. Prop trading is like 100X(!!!) harder than working at a ibank, though getting in an ibank maybe be 100x harder than getting into a prop trading shop, because most prop shop if you show up with $ they don't really care about credentials.

There are many things working against the average prop trader.

1) Undercapitalization
- a few unlucky hit and your $10K-$25K acct is over.

The effects of undercapitalization manifest itself in more than just absorbing losses. It affects your psychology when you trade. So, every lil fluctuation means so much to your small acct. A multi-billion funds or a big institutional trader does react to very such small fluctuations in the same way. And they can hold onto their positions.

Because I've noticed I as well as many fellow prop traders can't stand the noise and have to get out at small profits or stop out at small losses or even "relatively" big losses. But for the big traders that's nothing. They have the luxury of long-term view.
Also, most ibanks trader get a decent salary. So, they don't have to worry that they have to "win" every single day.

2) market making vs prop trading
Most peopel on this board must know the distinction. Most trading desks on the Street are devoted to market making and NOT prop trading. That's you trade to make a market on behalf of your institutional clients(for fund managers). And NOT to make market directional bets! And so, most prop traders here "scalp" and thus competing w/ market makers who have an informational advantage via order flow information and large capital to withstand minor market gryations. I think that's a VERY VERY VERY DIFFICULT game unless your commission is near zero!
IMHO, I think it's better if the ave prop trader here try to figure out a strategy and go for it rather than try to get nickels and dimes w/ the specialists and market makets. It's DEFINITELY possible since I've seen quite afew successful "scalpers" but for 95% of the ppl it's a loser or very difficult game.

3)Lack of training/strategy
- Now, this bring me to the real reason why I'm here or anyone should be here - Is to make a bet with an "edge" so that you are not competing with liquidity provider. But have a positive expected value system. However. ibanks hire quants w/ phds in math/physics to peruse through tons of data to find small niches to arbitrage or take directional bets. So, the average ibank trader has the advantage of knowing that these strategies do work.

The UPSIDE of prop trading as a member here rtharp pointed out is that FREEDOM to do whatever you want. In order to gain that freedom you have to pay a price! That price is long and hard and painful learning process. I'm going through that and it's not fun!

Just to clear things up....Every single bank on the street has traders working on their prop desk: Goldman, Merrill, Lehman, Bear, Morgan Stanley, Salomon, etc. 99.9% of the people on this board are not these traders. When you can move in and out of stocks with mega size (100K shares and up) you are playing an entirely different game. The game is not "let's see if I can make some money," it's "let's see how much money I can make." These guys have 1000X the buying power that most people here have. Like I said before, it's a totally different game, which if you can get into, is a wonderful game to play...whether you have to work for somebody else or not. I would gladly give up my independence to walk home with $1M guaranteed every year (not in every case, but in many), and the security that comes along with that.

Just to clear things up....Every single bank on the street has traders working on their prop desk: Goldman, Merrill, Lehman, Bear, Morgan Stanley, Salomon, etc. 99.9% of the people on this board are not these traders. When you can move in and out of stocks with mega size (100K shares and up) you are playing an entirely different game. The game is not "let's see if I can make some money," it's "let's see how much money I can make." These guys have 1000X the buying power that most people here have. Like I said before, it's a totally different game, which if you can get into, is a wonderful game to play...whether you have to work for somebody else or not. I would gladly give up my independence to walk home with $1M guaranteed every year (not in every case, but in many), and the security that comes along with that.

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jskri:

True, that every Street firm has prop traders. But a vast majority of so called "traders" are really market makers. Probably around 95-98% of trading desk on the Street are built to provide liquidity to their institutional clients. I've worked on such trading desk.

However, a small minority of them are prop traders. That is they are allowed to take positions and risk firm's capital as "principals" rather than agency traders.

And size is a function of strategy. So, it's NOT true that any old trader on the Street can swing around a few hundred millions. Or whatever. Certain well understood and relatively safe strategy, they allow one to put on $50M/per side long/short. So, they work on totally different horizon. The prop traders here as I've said seemed to be more interested in competing with the scalpers on the floor or NYSE specialists. That game is fast becoming harder with the move to smaller spreads, electronics trading, and just noise on the horizon. Still doable but very difficult IMHO.

On the other hand, the really big players are actually hedge funds who swing around hundred of millions or even billions leveraged up. They make the average prop trader on the Street look like pussycats. That's why a lot of prop trader on Street leave to work for hedge funds(better pay too).

About pay, you wrote,"I would gladly give up my independence to walk home with $1M guaranteed every year (not in every case, but in many), and the security that comes along with that."

That's just not true! Not everyone is that well compensated! The base salary ranges typical for beginning from $80K-$150K base + bonus. So, total comp could be $200K-$500K. Or the bonus could be $0 and a pink slip. So, there's NO guarantee in life or in trading!!

However, the "star" traders can typically rake in $1M+. But not every Street prop trader is a star trader. But given enough seniority and time, you can comfortably pull in $500K-$750K if you are decent. But you face uncertain employment,etc. Not that these prop shops guarantee anything either...

Just to clear things up....Every single bank on the street has traders working on their prop desk: Goldman, Merrill, Lehman, Bear, Morgan Stanley, Salomon, etc.

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Proprietary trading is not that extended these days because shareholders and management consider it "risky". There are a few though, but if you can make money, why share it with the bank? Go open a hedge fund. If you are not that good at trading, and manage to climb to a MD position before they get tired of you, then of course an IB is a better bargain but your job won't be about trading, it will be about sucking up upper mgmt and the clients.